The Great Divergence and the New Geography of Inequality

What I find most striking about the socioeconomic differences between the three Americas is that they are not going away. Instead, the divergence among our communities is deepening and accelerating. Cities and states that start off strong tend to become relatively stronger, and cities that start off weak tend to become relatively weaker.

 Map 3 shows the change in the percentage of workers with a college education since 1980 for each metropolitan area in the country. Boston was already well educated in 1980; since then it has increased its share of college-educated workers by 23 percentage points, a jump of more than two-thirds relative to its 1980 level. Stamford has outperformed all other cities, doubling its percentage of college-educated workers. By contrast, since 1980, Visalia and Merced have added only one percentage point to their shares of college-educated workers. It is hard to believe, but Flint has not added college-educated workers to its labor force in thirty years. While the rest of the country has become better and better educated, Visalia, Merced, and Flint have been treading water—and barely staying afloat.

This Great Divergence is among the most significant developments in recent American economic history. As communities grow apart, the U.S. population is becoming more and more segregated, not across urban neighborhoods but across cities and regions. With every passing year, college graduates are increasingly settling in cities where many other college graduates already reside, while high school graduates are increasingly settling in cities where many other high school graduates reside. A good way to appreciate the Great Divergence visually is Figure 5, which shows the gains since 1980 in the percentage of college-educated workers for the ten most educated cities and the ten least educated cities in each year. In the past three decades, the top group has experienced large gains, while the bottom group has grown much less.

Evidence indicates that American cities are more racially integrated today than at any time in the past century, a trend that has been accelerating in the past two decades. In 2010, for example, there were virtually no all-white neighborhoods, and the number of predominantly black neighborhoods has plummeted. It is somewhat ironic that at the very moment that our neighborhoods were desegregating racially, our country was segregating educationally. This has tremendous economic implications, but also social and political ones. A country that is made up of regions that differ drastically from one another will end up culturally and politically balkanized. Moreover, the concentration of large numbers of poorly educated individuals in certain communities will magnify and exacerbate all other socioeconomic differences.

The divergence in education levels is causing an equally striking divergence in wage levels. Measured in 2010 dollars, the salaries of college graduates in Boston and San Jose have grown by more than $30,000 since 1980. At the other end of the spectrum, the salary of college graduates in Flint has actually declined over this period by $11,645. Flint may be an extreme case, but the trend can be seen nationwide. Indeed, Figure 6 shows the gains At its heart, the Great Divergence is driven by a structural shift in the American economy. Ever since the first European immigrants reached America’s shores, the country’s economic map has been constantly evolving. While its borders and natural landscape are largely immutable, the country’s cities rise and fall as their fortunes change. This has always been true and it will remain true. Just consider this: although the total population of the United States has quadrupled since 1900, more than a quarter of U.S. counties have actually lost population in this period, a quarter have grown faster than the average, and the top twenty counties have grown by more than one hundred times. Clark County, which encompasses Las Vegas, has increased its population 1,400-fold.

 The factors driving the fortunes of local communities continually change. Just as investors have a portfolio of stocks, each city has, in effect, a portfolio of industries. Like good stocks, some industries grow. Other industries decline. Between the 1880s and the 1920s, the decline of agriculture caused an enormous geographical reallocation of labor and wealth. As farming became increasingly mechanized, fewer and fewer hands were needed in the field, and rural counties started shedding jobs and population. This shift coincided with the rise of the great manufacturing capitals. Over the past forty years, this process of geographical reallocation has been largely driven by the marked shift toward knowledge-intensive industries. This trend reflects deep changes in the global technological landscape and the United States’ comparative advantage in the world economy and is therefore unlikely to go away anytime soon. It is almost as if, starting in the 1980s, the American economy bifurcated. On one side, cities with little human capital and traditional economies started experiencing diminishing returns and stiff competition from abroad. On the other, cities rich in human capital and economies based on knowledge-intensive sectors started seeing increasing returns and took full advantage of globalized markets.   

Much of the current debate on inequality in the United States focuses on the class divide between the America of the privileged—those with a good education and solid professional jobs—and the America of the underprivileged—those with low levels of schooling who often live from paycheck to paycheck with no job security. This view reflects the intuitive notion that technological change and globalization benefit one group and hurt the other, but it misses the important point that the two groups are affected differently in different places. Technological change and globalization result in more employment opportunities for a low-skilled worker in a high-tech hub but fewer opportunities for a similar worker in a hollowed-out manufacturing town. What divides America today is not just socioeconomic status but also geography.